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Business/Finance See other Business/Finance Articles Title: Russia's Central bank hikes key interest rate to 10.5% to combat inflation, plunging ruble The Russian Central Bank has increased borrowing costs to 10.5 percent to avoid a further rout of the ruble. The currency has lost more than 40 percent this year, and annual inflation is slated to reach 10 percent. Rising inflation spurred the aggressive rate hike. The bank sees inflation hitting 10 percent for 2014. As of December 8, inflation stood at 9.4 percent, according to the Central Bank. “Consumer prices continued to accelerate in November and the beginning of December. The increase in inflation and the expectation of devaluation creates a significant risk for inflation,” the bank said in a statement, released Thursday. The regulator increased the rate by 100 basis points, bringing this years’ total increase to 500 basis points. At the beginning of the year the benchmark interest rate was 5.5 percent. The bank’s board met for the last time in 2014, and said that it will continue to raise interest rates to curb rising inflation. The bank only sees a chance of recovery in economy activity in 2017. It has revised its 2014 growth forecast to 0.6 percent. Russia's slowed growth has been complicated by the fast slide of its currency, the ruble, which has lost more than 40 percent against major hard currencies this year. The ruble has so far reacted neutrally to the bank's decision, only dropping about 0.5 percent at 14:00 MSK, with the ruble trading 55 per USD and nearly 69 to the euro. Bank Of #Russia Raises Interest Rates. Ups Key Rate By 100 Bps To 10.5%. Ruble little changed, now 55.13 pic.twitter.com/lFbxVzlNWQ Even though Russia has the world's third largest foreign currency reserves at just over $418 billion, it is at a four-year low and $100 billion less than this time last year. The Ukraine crisis and massive capital outflow have forced the bank to spend over $70 billion to prop up the ruble this year. Post Comment Private Reply Ignore Thread
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